TMI Blog2021 (5) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... AS BHARTI TELE-VENTURES LTD.) VERSUS THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (9) TMI 38 - BOMBAY HIGH COURT] was considered by the Delhi High Court. Whether the assessees are entitled to claim CENVAT credit on the towers and shelters either as capital goods or inputs in terms of Rule 2 (a) and (k) of the CENVAT rules and whether towers and shelters would qualify as accessories ? - HELD THAT:- The finding recorded by the Delhi High Court in VODAFONE MOBILE SERVICES LIMITED on this issue and held that There is actual use of tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. Whether the Tribunal erred in applying the nexus test with reference to MS angles and channels as according to the appellant what was bought to the site were towers, shelters and accessories in CKD/SKD conditions for providing services? - HELD THAT:- Delhi High Court in VODAFONE MOBILE SERVICES LIMITED has held that the CESTAT erred in applying the nexus test and therefore, credit has to be extended to the duty paid MS angles and channels. Whether the appellant was justified, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue involved in this appeal is about the eligibility of the appellant to claim CENVAT credit on tower, tower material, shelter etc. The Commissioner has confirmed the denial of CENVAT credit primarily on the ground that the subject goods being attached to earth, are immovable in nature and thus, not used for providing output services. 4. The Department has relied for this purpose on a Board Circular dated 26.02.2008. It is reproduced below: 1. It has been brought to the notice of the Board that telecom operators are availing Cenvat Credit on goods like angles, channels, beams, which are used for building transmission towers. Similarly, Cenvat Credit is also being availed on pre-fabricated building, shelters, PUF panels, etc., used for housing/storage of generating sets and other equipments. It appears that the telecom operators claim these items to be inputs for providing telecom services. 2. The issue has been examined; the items mentioned above are used for erecting towers, and making housing/storage units. Thus, these goods are used in making products that cannot be called as excisable goods, being attached to earth, and are not chargeable to excise duty. The it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar, learned Authorized Representatives of the Department, however, supported the impugned order and submitted that treating the prefabricated building (telecom shelter) and tower/tower materials/tower structure as movable goods and allowing CENVAT Credit of the duty paid on these items on the output service namely, the cellular service, is not correct because in the CKD or SKD condition the tower and parts thereof would fall under Chapter Heading 7308 of the Central Excise Tariff Act, 1984, which is not specified in clause (i) or clause (ii) of Rule 2 (a) (A) of the CENVAT Rules so as to be capital goods. In this connection reliance has been placed upon the decision of the Bombay High Court in Bharti Airtel Ltd. vs. Commissioner Central Excise, Pune lll [2014 (35) S.T.R. 865 (Bom)]. 8. Learned Authorized Representatives of the Department also submitted that the decision of the Delhi High Court in Vodafone Mobile Services was assailed before the Supreme Court and notice has been issued in the Special Leave Petition. Thus, in view of the decision of the Supreme Court in Union of India vs. West Coast Paper Mills Limited [2004 (164) E.L.T. 375 (S.C.)], reliance should not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods is the functional utility test. If an item is required for providing out the output services of the service provider on a commercial scale, it satisfies the functional utility test. In the facts of the present case, what emerges is that, BTS is an integrated system and each of its components have to work in tandem with each other in order to provide the required connectivity for cellular phone users and for efficient telecommunication services. The towers and pre-fabricated shelters form an essential in the provision of telecommunication service. The CESTAT-in the opinion of this court-failed to appreciate that it is well settled that the work used should be understood in a wide sense, so as to include passive as well as active use. The towers in CKD condition are used for the purpose of supplying the service and therefore, would qualify as inputs . There is actual use of tower and shelters in conjunction with the Antenna and the BTS equipment in providing the output service, which also includes provision of the Business Support Service. The CESTAT has failed to appreciate that the towers and the parts thereon and the pre-fabricated shelters are inputs, in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons of use. The entitlement of CENVAT credit is to be determined at the time of receipt of goods. The fact that such goods are later on fixed/fastened to the earth for use would not make them a non-excisable commodity when received. Therefore, this question is answered in favour of the assessee and against the Revenue. (emphasis supplied) 20. Question No. 5 as framed by the Delhi High Court is whether emergence of immovable structure at intermediate stage (assuming without admitting) is a criterion for denial of CENVAT credit? 21. The finding is contained in paragraph 73 of the judgment of the Delhi High Court and it is as follows: 73. The conclusion of CESTAT, denying the assessee CENVAT credit on the premise that the towers erected result in immovable property, is erroneous and plainly contrary to Solid and Correct Engineering (supra) . The towers that are received in CKD condition, are erected at site, subsequently, giving rise to a structure that remains, safe and stable (commercial reasons of use). The fact that in the intermediate stage, an immovable structure emerged, is of no consequence, in the facts of the present case. It is a settled principle of law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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